Overview
Large Bermudian reinsurers and the four major European reinsurance groups reported a 19.9% return on equity during the first half of 2026, according to Gallagher Re.
The sector has enough earnings capacity to absorb an insured loss event of $50 bn to $75 bn, on top of normal natural catastrophe losses during the second half, and still earn its cost of equity for the year.
Gallagher Re described the 19.9% reported ROE as the second-highest first-half result of the past decade. Lower-than-normal natural catastrophe losses contributed 3.4 percentage points to that result.
Key highlights
- Reinsurers reported a 19.9% ROE in H1 2026, the second-highest first-half result of the past decade. Lower-than-normal natural catastrophe losses added 3.4 percentage points.
- Gallagher Re raised its full-year 2026 ROE forecast to 16.5-17.5%, from 14-15%, after stronger-than-expected first-half earnings.
- Dedicated reinsurance capital increased 5.1% to a record $688 bn in H1 2026. Traditional capital reached $541 bn, while alternative capital rose to $147 bn.
- P&C reinsurance premiums declined 6% across the composite as softer pricing reduced growth, with less diversified Bermudian reinsurers more exposed to property catastrophe rate declines.
- The sector has enough earnings capacity to absorb an additional $50 bn-$75 bn insured loss event, beyond normal H2 catastrophe losses, while still earning its cost of equity in 2026.
Underlying ROE fell to 13.8% from 15.3% a year earlier. The underlying combined ratio increased 0.9 percentage points to 94.2% as softer rates reduced underwriting margins.
Stronger first-half earnings prompted Gallagher Re to raise its full-year 2026 ROE forecast to 16.5-17.5%. Its previous estimate stood at 14-15%.
The revised forecast assumes normalised natural catastrophe losses during H2. Gallagher Re also assumes reserve releases and realised investment gains remain close to long-term averages.
Reinsurance profitability in 2026
| Metric | Result |
| Reported H1 2026 ROE | 19.9% |
| Underlying H1 2026 ROE | 13.8% |
| Underlying H1 2025 ROE | 15.3% |
| Underlying combined ratio | 94.2% |
| Increase in combined ratio | 0.9 pp |
| Revised 2026 ROE forecast | 16.5-17.5% |
| Previous 2026 ROE forecast | 14-15% |
Reinsurance buyers expect property pricing to fall further at the January 2027 renewals, with double-digit reductions increasingly entering negotiations.
Reinsurance capital reaches record
Dedicated reinsurance capital increased 5.1% during H1 2026 to a record $688 bn. Traditional and alternative capital both increased, though growth slowed.
Traditional reinsurance capital rose 4% to $541 bn during the period, and Gallagher Re expects the figure to reach $549 bn by year-end, representing 6% full-year growth.
Under Gallagher Re’s revised methodology, traditional capital consists of reinsurance groups and diversified groups.
Capital among reinsurance groups declined $2 bn, or 1%, to $267 bn. Strong profitability faced an offset from higher shareholder distributions, with the cohort returning $15 bn of capital. Financial markets and foreign-exchange movements created another $5 bn headwind.
Diversified groups increased capital by $23 bn, or 9%, to $274 bn. Berkshire Hathaway accounted for much of the increase. Excluding Berkshire Hathaway, traditional reinsurance capital remained flat against the end of 2025.
Non-life alternative capital rose 9% to $147 bn. Gallagher Re attributed the increase to investment returns, net inflows and further catastrophe bond growth, together with expansion into casualty business.
Reinsurance capital
| Capital measure | H1 2026 |
| Total dedicated reinsurance capital | $688 bn |
| H1 growth | 5.1% |
| Traditional reinsurance capital | $541 bn |
| Traditional capital growth | 4% |
| Expected traditional capital at year-end | $549 bn |
| Reinsurance group capital | $267 bn |
| Diversified group capital | $274 bn |
| Non-life alternative capital | $147 bn |
Global reinsurance dedicated capital totaled $769 bn at full-year 2024, a rise of 5.4% versus the restated full-year 2023 base. Reinsurance capital reached a record high at 2025 with about 8% growth in traditional capital to $710 bn while alternative capital grew by approximately 12% to $128 bn.
Capital movement by segment
| Segment | Change |
| Reinsurance groups | -1% |
| Diversified groups | 9% |
| Non-life alternative capital | 9% |
| Capital returned to shareholders by reinsurance groups | $15 bn |
| Financial markets and FX headwind | $5 bn |
According to Beinsure, reinsurance industry is showing strong momentum. Fund and Insure domain as the big opportunity – potentially generating $17 tn in gross value by 2035. Global premiums climbed 8.6% to €7 tn, the sharpest annual rise since before the financial crisis, according to Allianz. Growth cut across life, non-life, and health segments. Beinsure highlighted key points and trends.
Higher payouts absorb excess capital
Reinsurers have responded differently to excess capital. Arch and Hamilton recorded the largest changes in shareholder distributions, with total payout ratios rising by more than 70 percentage points to above 90%. Everest Re and RenaissanceRe increased payouts by less.
European reinsurers also returned more capital. Hannover Re, Munich Re and Swiss Re distributed slightly more than 100% of their H1 2026 profits to shareholders.
Fitch Ratings views the global reinsurance sector as challenging, with abundant capacity and intense competition leading to price erosion across most reinsurance lines and looser policy terms and conditions, although reinsurers are expected to maintain favorable returns in 2026.
Fitch expects the U.S. property and casualty insurance sector to remain relatively stable in 2026 and achieve slightly lower underwriting profits and net earnings, driven by continued strong performance despite headwinds that challenge top-line growth.
Global reinsurance pricing softened more than many market participants expected at the Jan. 1, 2026 renewals, according to Moody’s Ratings.
Moody’s said property catastrophe pricing landed slightly lower than anticipated. Insured natural catastrophe losses still cleared $100 bn globally in 2025, yet the loss mix mattered.
For the sixth straight year, global insured catastrophe losses exceeded $100 bn – a result driven not by severity perils like earthquakes and hurricanes, but by record-setting wildfires and significant severe thunderstorm activity, which produces widespread hail, wind and tornado damage across many communities rather than a single catastrophic event.
Verisk warned that years without US hurricane landfalls sometimes encourage weaker pricing or less restrictive underwriting terms. The firm’s $171 bn estimate instead measures potential insured losses across a much wider set of regions and perils.
P&C reinsurance premiums fall 6%
Premium growth slowed as reinsurance pricing softened during the first half. P&C reinsurance premiums across Gallagher Re’s composite declined 6%. The large European groups faced less P&C revenue pressure than their Bermudian peers and shifted more capital toward life and health reinsurance.
Less diversified Bermudian reinsurers carry greater exposure to declining property catastrophe pricing.
Arch and Lancashire recorded the largest swings. Their premium growth moved from 14-19% in H1 2025 to declines of 10-11% in H1 2026.
Everest Re and RenaissanceRe also reported material premium reductions. Hamilton remained the only company in the composite with substantial premium growth, reporting a 14% increase. Scor recorded growth of 4%, compared with a 4% decline a year earlier.
Reinsurance sector retains room for a major catastrophe loss
Gallagher Re estimates the sector remains profitable even after an additional insured loss event of $50-75 bn, assuming normal H2 natural catastrophe losses.
A much larger shock would be required to consume the industry’s excess capital. Gallagher Re estimates additional insured losses of at least $150 bn, beyond normal H2 catastrophe losses, would return the premium-to-capital ratio to 2023 levels.
The broker expects its composite to finish 2026 with around $13 bn of cumulative profit above the cost of equity generated between 2017 and 2026.
Reinsurance loss absorption capacity
| Stress measure | Loss estimate |
| Additional insured loss still consistent with earning cost of equity | $50-75 bn |
| Losses needed to eliminate excess capital | $150 bn |
| Estimated cumulative profits above cost of equity, 2017-2026 | $13 bn |
| Combined-ratio deterioration needed to erase excess profits | 6-7 pp for 3Y |
Erasing those excess profits would require an additional 6-7 percentage points of combined-ratio deterioration for three consecutive years. Under that scenario, cumulative ROE across the period would fall back in line with the cost of equity.
Natural catastrophe risk remains a major source of reinsurance demand. Insured catastrophe losses have been increasing at an annual rate of 5-7%, driven by greater exposure, higher asset values and shifts in hazard patterns.
FAQ
How profitable were reinsurers in the first half of 2026?
Large Bermudian reinsurers and the four major European reinsurance groups reported a 19.9% return on equity. Gallagher Re described it as the second-highest first-half result of the past decade.
What is the 2026 reinsurance ROE forecast?
Gallagher Re expects full-year ROE of 16.5-17.5%, compared with its previous forecast of 14-15%. The estimate assumes normalised catastrophe losses in H2.
How much reinsurance capital is available in 2026?
Dedicated reinsurance capital reached a record $688 bn in the first half of 2026, up 5.1%. Traditional capital accounted for $541 bn and alternative capital for $147 bn.
Why is underlying reinsurance profitability declining?
Underlying ROE fell from 15.3% to 13.8%, while the underlying combined ratio increased to 94.2%. Gallagher Re linked the deterioration partly to softer pricing and pressure on underwriting margins.
Why are P&C reinsurance premiums falling?
P&C reinsurance premiums declined 6% across the composite as pricing softened. Bermudian reinsurers with less diversification were more exposed to lower property catastrophe rates.
How large a catastrophe loss could reinsurers absorb?
Gallagher Re estimates the sector could absorb an additional insured loss of $50-75 bn on top of normal H2 natural catastrophe losses and still earn its cost of equity in 2026.
What size loss would eliminate the sector’s excess capital?
Gallagher Re estimates losses of at least $150 bn, beyond normal second-half catastrophe losses, would be needed to eliminate excess capital and return the industry’s premium-to-capital ratio to 2023 levels.
